Financial stability is the condition whereby the financial system, which includes banks, insurance companies and other financial intermediaries, can withstand shocks without major disruption. Such ability to withstand shocks should allow the financial system to continue financial intermediation and provide financial services. As such, having a stable financial system is imperative for any economy, as it has a positive impact on economic development and growth. The importance of such is recognised globally, but in Seychelles, this has come to the fore as the financial sector is expanding and new entrants are joining the industry. With the increased number of market participants, a broader range of financial services and products on offer and a more liberalised economy, it is important that the financial system can withstand adverse domestic and external shocks.

As a result of these developments, it was deemed fit that the importance of financial stability should be elevated, hence a Financial Stability Committee (FSC) was established in March 2016, tasked with maintaining financial stability within the domestic economy. Members of this Committee are the:

• Central Bank of Seychelles (CBS), which holds the Chairmanship;
• Ministry of Finance, Trade, Investment and Economic Planning;
• Financial Services Authority; and
• Financial Intelligence Unit.

The Committee is an advisory body where members can inform one another of emerging risks and risk factors, determine the correct and combined response to mitigate the build-up of excessive risks and collectively ascertain the state of financial stability within the country.

Aside of the FSC, which is a high-level committee, a supportive arm based within CBS - the Financial Stability Section (FSS) - was also established. The latter resides within the Financial Surveillance Division of CBS, given the Bank’s mandate in relation to domestic financial stability. The FSS collects and analyses data from each member institutions in order to produce a comprehensive overview of the country’s financial stability status and proposes tools or policy changes for maintaining financial stability.

The FSC seeks to ensure that macro stability risks do not impact on the financial stability of the economy by making use of analyses provided by the FSS, which focus on the identification of risks in the macro-economy and financial market. In addition, the FSS conducts market surveillance, performs systemic risk management, stress tests the financial system and manages risks arising from potential disruptions to the payment and settlement systems.

The FSC meets on a quarterly basis to be apprised of the financial stability environment, following which a public statement is issued.